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July 26, 2017

Improving Internal Audit in the Caribbean

Cartac

Posted by Celeste Kubasta[1]

A workshop held in Barbados in June 2017 showcased the progress made by many countries of the Caribbean region in improving the efficiency and effectiveness of internal audit units over recent years. The workshop was organized by the IMF’s Caribbean Regional Technical Assistance Center (CARTAC). It was the fourth annual workshop which brought together internal audit practitioners from CARTAC member countries. The representatives shared their experiences and to discussed best practices, opportunities, and challenges in building capacity and improving effectiveness.

The popularity of this workshop has increased each year. This year 42 participants from 15 CARTAC countries, as well as Haiti and the Eastern Caribbean Central Bank, attended the workshop.

Over the years, the focus of the annual workshop has evolved. More specialized topics such as fraud assessment and systems audits of payroll and revenues, have been added to the agenda. A survey carried out in 2015, summarized below, highlighted opportunities for further development of internal audit in the region. The results of this survey have assisted CARTAC in planning subsequent workshops and other capacity-building activities.

  • Establish a clear and distinct authority for internal audit
  • Prepare and approve an internal audit charter
  • Adopt international audit standards, conduct a gap analysis, and prepare an action plan to work toward conformity with these standards
  • Encourage staff to pursue professional accounting and auditing certifications
  • Begin regular risk assessment as the basis for annual audit plans
  • Work with management and audit committees to obtain timely responses to audit recommendations
  • Establish audit committees with an approved charter 

The ‘Three Lines of Defense’ Model  was introduced at the 2016 workshop to help internal auditors establish to what extent their activities were: (i) genuinely related to internal audit (third line) work—that is, providing independent assurance to management and the audit committee on issues of governance, risk management, and control—compared to carrying out (ii) internal control activities (first line), or (iii) risk and compliance work for management (second line). A survey carried out during this workshop showed that, in practice, more than 90 percent of the auditors’ work was in the second or third categories, and thus not directly related to the internal audit function.

The focus of the workshops has recently shifted to the importance of applying the Institute of Internal Auditor’s International Professional Practices Framework (IPPF). Recent workshops have included sessions on these standards and their implementation. Internal audit units have been asked to consider their current level of conformity with the IPPF. With the support of CARTAC, three countries have completed a self-assessment, and prepared an action plan to bring their practices into line with these standards.

From the beginning, a popular aspect of the workshops has been presentations by the participants. A recent presentation on researching, acquiring, and implementing audit management software proved of great interest to participants who may have thought such software was beyond their means. Participants were surprised to learn of the wide range of software options, and several countries are committed to exploring these options over the next year.

Another popular feature of the workshops has been roundtable discussions of topics of common interest. This year, one roundtable focused on how to establish effective internal audit committees. The benefits of audit committees were highlighted, notably their positive influence on management’s implementation of audit recommendations. Several countries without audit committees expressed an interest in establishing them, while others made a commitment to approving and updating their audit committee charters.

A key output of the workshops is the preparation of action plans to further develop the countries’ internal audit capacity and effectiveness. At the beginning of the workshop, each country makes a presentation on its progress in implementing the previous year’s action plan, as well as a summary of its audit activities during the year. On the final day of the workshop, each country presents its action plan for the upcoming year. This year, there were 20 individual action plans in total. Based on identified needs and actions, countries will discuss their specific TA needs with CARTAC PFM advisors over the coming weeks, with a view to arranging capacity-building TA missions during 2017 and 2018.

[1] PFM Advisor, Caribbean Regional Technical Assistance Center (CARTAC).

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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